Reference no: EM13553506

 

Krause Industries' balance sheet at December 31, 2012, is presented below.

KRAUSE INDUSTRIES Balance Sheet December 31, 2012 Assets
Current assets
Cash		$7,500
Accounts receivable		82,500
Finished goods inventory (2,000 units)		30,000
Total current assets		120,000
Property, plant, and equipment
Equipment	$40,000
Less: Accumulated depreciation	10,000	30,000
Total assets		$150,000
Liabilities and Stockholders' Equity
Liabilities
Notes payable		$25,000
Accounts payable		45,000
Total liabilities		70,000
Stockholders' equity
Common stock	$50,000
Retained earnings	30,000
Total stockholders' equity		80,000
Total liabilities and stockholders' equity		$150,000

Additional information accumulated for the budgeting process is as follows.

Budgeted data for the year 2013 include the following.

	4th Qtr. of 2013	Year 2013 Total
Sales budget (8,000 units at $35)	$84,000	$280,000
Direct materials used	17,000	69,400
Direct labor	12,500	56,600
Manufacturing overhead applied	10,000	54,000
Selling and administrative expenses	18,000	76,000

To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2013, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $4,000 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 30% of income before income taxes. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2013, the company expects to purchase additional equipment costing $19,000. It expects to pay $8,000 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2013, includes amounts due suppliers (see above) plus other accounts payable of $5,700. In 2013, the company expects to declare and pay a $5,000 cash dividend. Unpaid income taxes at December 31 will be $5,000. The company's cash budget shows an expected cash balance of $7,950 at December 31, 2013.

Instructions

Prepare a budgeted income statement for 2013 and a budgeted balance sheet at December 31, 2013. In preparing the income statement, you will need to compute cost of goods manufactured (direct materials +direct labor+manufacturing overhead) and finished goods inventory (December 31, 2013).